China wants to create its own ExxonMobil - media

China is reportedly considering ways to merge its state-owned oil companies to better compete globally as oil prices fall and its economy slows.

The Chinese government has decided to combine the China National
Petroleum Corp. (CNPC) and its main domestic rival China
Petrochemical Corp. (Sinopec) as well as other major energy
companies - China National Offshore Oil Corp. (CNOOC) and
Sinochem Group, according to the Wall Street Journal.

The decision to consolidate China’s oil sector by joining big
state-owned firms into a single giant is part of an effort by
Chinese President XI Jinping to make the country’s oil producers
more competitive globally and assert China’s prominence.

The merger of CNPC and Sinopec would create one of the world’s
biggest companies with control of the vast majority of China’s
onshore oil and gas production. The merger of all four major oil
producers would create an entity twice as big as ExxonMobil by
revenue.

“We want to create a big Chinese brand to better compete
overseas,” the Chinese official was quoted as saying.
“We want our own ExxonMobil.”

“If you are focused on the foreign market, you certainly want
to consolidate because it’s more competitive abroad,” Lin
Boqiang, director of the China Center for Energy Economics
Research at Xiamen University told the WSJ. “But if it’s just
for the domestic market it’s better to have more competition,
because competition leads to efficiency.”

China’s government wants to reorganize the whole oil sector to
boost efficiency in the economy by changing the focus from
domestic competition to foreign. Over the last 15 years major
Chinese manufacturers have been competing against one other by
cutting prices.

“They’re increasingly fighting among each other,” one of
the officials with knowledge of the consolidation plan told the
WSJ. “That has led to lots of waste and inefficiency.”

China’s currently facing a huge problem with overcapacity, which
forces the country’s oil companies to compete strongly with each
other. Chinese officials suggest that “combining and
streamlining the operations of the main oil manufacturers will
help to reduce waste caused by redundant staff and
projects,” the WSJ reports.

Falling oil prices have forced the government of China to take
further steps as strong international companies are making big
deals all over the world. Spain’s Repsol acquired Canadian oil
and gas producer Talisman Energy Inc. for $8.3 billion last year.
The Chinese government also decided to merge the two state-owned
railcar makers in an effort to compete with Germany’s Siemens and
Canada’s Bombardier.